Brazil Considers Ending Income Tax Deduction for Medical Expenses
RIO DE JANEIRO, BRAZIL – A study by the Ministry of Economy proposes the end of medical expense deductions in exchange for a decrease in personal income tax rates.
Deductions permit lowering the amount of tax to be paid or increasing the refund to be received.
Study estimates point out that the end of the deduction of medical expenses may be offset by reducing the rates of all income brackets by eight percent.
The change has the potential to reach a more significant number of Brazilians who pay income tax and would cost the public coffers less, according to the government team.
Today, deduction of medical expenses benefits only the wealthiest twenty percent of the Brazilian population.
The study’s findings showed that the policy of granting a subsidy through the deduction of medical expenses feeds the overall regressive nature of the national tax system, in which those earning less pay proportionally more tax than those with higher income.
In other words, medical deductions tend to increase the country’s income inequality.
Projections
According to simulations made by the Ministry of Economy, an eight percent cut in each of the current bracket rates (7.5 percent, 15 percent, 22.5 percent, 27.5 percent) would imply a decrease of R$14.6 billion in revenue.
The tax expense (subsidy) with medical deductions in 2017 was higher, reaching R$ 15.1 billion – equivalent to 32.8 percent of total health subsidies and 8.9 percent of the collected personal income tax.
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